Swedish wages rise in H1 2017, wages likely to rise more in public sector

Swedish wages rose in the first half of 2017. Wages increased 2.6 percent year-on-year. Wage rises are high in municipalities, but wage drift is still absent within the business sector. Labor shortages are close to all-time high, and for the first time in years, there are some hints that wages might rebound. Hourly wages rose on average by 2.6 percent in the first half of 2017, suggesting a wage drift of about 0.4 percent. But these figures are forecasts by the Swedish National Mediation Office; the preliminary outcome for the first half indicate wage rises at 2.2 percent are no wage drift.

Wage rises are highest in the municipalities, particularly for higher-earners in that sector. Monthly wages rose by 15.3 percent for heads of preschool departments in the last year. Wage rose in all regions, but most so in Stockholm.

Even if higher wages in municipalities impact overall demand, other sectors have a more direct effect on inflation. Wage drift in the business sector continues to be negligible and wages in the retail sector is even below the central agreement.

According to a Nordea Bank research report, wages are expected to continue to rise more in the public sector than in the business sector. Overall, even if wages do rise, they are expected to remain on the low side during the next years, which strengthens the view that inflation would remain below target in 2018, and that the Riksbank’s first rate hike would come late 2018, added Nordea Bank.

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